Supporting as much as three-quarters of the state's economy the Hawaii tourism industry is in crisis. There are plenty of vacancies for vacationers to the islands, which are suffering through the worst economic downturn since at least the mid-1970s as housing markets stall.
Tourism is declining as the financial crisis batters Hawaii. Housing prices have dropped on condos and homes, but the fallout hasn't been as devastating as in the mainland. Foreclosures are projected to rise as more second home buyers walk away from mortgages that have become too expensive to handle in the economic downturn.
In Honolulu, the first time buyers tax credit prodded more buyers to make a move, but the rate of home and condo sales is far behind year ago levels. Prices haven't yet fallen enough to interest more buyers to establish a rebound in Oahu, where many brokers feel the market is reminiscent of a buyer's market.
More than a quarter of all sales have been of lower priced foreclosures and as banks slash prices on foreclosed properties the market should see more interest from bargain hungry investors. A weak local economy will contribute to a slow recovery. The downturn in Hawaii developed much later that the rest of the U.S. and should follow accordingly at a slower pace. Honolulu average housing prices are forecast to deflate 9.7% in 2010.
| City |
Forecast |
| Honolulu |
− 9.7% |
| Maui |
− 10.3% |
| Hilo |
− 8.2% |
| Kauai |
− 7.2% |
Sales of lower priced condos are rising in Maui, but are still on par with sales from 1995 when the Hawaii economy was in the tank. The government offered tax incentives coupled with low interest rates triggered the increase in sales, and stabilized prices but only for a temporary period.
As foreclosures pick-up in Maui as projected, the market should see more sales activity in the first half of the year, especially with the expansion of the tax credit to move-up buyers. As a result, Maui housing prices are forecast to decline 10.3% in 2010.
Lower priced foreclosures have driven more buyers back into the market in Hilo, the state's second most populated area. But home and condo sales still remain well below bubble levels, demonstrating that it will take longer for the area to recover from the over-pricing that developed during the boom.
The artificial appreciation that developed over money that was traded to the limits on Wall Street will take longer for Hilo to reach a point of stabilization from than other areas of the state. Housing prices are forecast to deflate another 8.2% in Hilo by year's end.
Fewer vacation home buyers make their place in the sun in Kauai, where island natives adopted strict building limits for high rises and growth limits years ago. The choices led Kauai to a quieter pace of life than other resort destinations with much slower home sales. Kauai is forecast to decline just 7.2% in average values during the year as a result.
